Suppose the Price of Gasoline Is $1

Multiple Choice

Suppose the price of gasoline is $1.25 per litre, the quantity of gasoline demanded is 40 billion litres per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $0.75 per litre, which increases the price of gasoline by $0.50 per litre.What is the new equilibrium quantity of gasoline demanded after the tax is imposed?

A) 37.67 billion gallons per year
B) 38.91 billion gallons per year
C) 39.21 billion gallons per year
D) 40.52 billion gallons per year